Posts By Croke Park Report

66 percent of public sector workers voting on the Croke Park 2 proposals rejected the deal. Of the 20 unions participating in the ballot, 14 rejected the deal and 5 accepted (we don’t have information on the vote from Veterinary Ireland). The result was overwhelming and conclusive.

There is one argument going around that says if four percent of public sector workers in SIPTU had switched from rejection to acceptance, then Croke Park 2 would have passed.

However, this overlooks the fact that two-thirds of public sector workers rejected the deal. A small change in any particular union would make no difference in the overall vote.

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The unions opposed to Croke Park 2 have launched an Equality Audit of the proposals. It focuses on the impact of changes in working conditions – issues which have not received as much attention as the pay-cut elements of Croke Park 2. Which is unfortunate as this audit shows is that these proposed will have a profound impact on women in particular, and family carers in general. This is why Croke Park 2 has been rightly labelled as anti-women and anti-family.

The Equality Audit is written by Niall Crowley who, as former head of the Equality Authority, is particularly well-placed to assess the impact of Croke Park 2. His key points are:

The provision for additional hours will have a higher impact on women – and for women and men with caring responsibilities. This could force women and carers out of the workforce.

There will be a similar impact of the provision regarding work sharing which will be reduced. Women and carers will be disproportionately hit. Furthermore, there will be a negative impact on productivity.

Flexi-time arrangements, again, will impact more negatively on women and carers. That the Croke Park 2 rules out any reference to family circumstance or the right to appeal to a third part means employees will have even fewer rights to maintain family-friendly working hours.

There is a potential loss of productivity arising from the proposals as the loss of work-sharing opportunities and flex-time, combined with more working hours will reverse the gains that these working practices produced in the past.

The effect of all this will be a management driven by spurious and highly misleading balance-sheet considerations which will disguise the loss of productivity in the public sector, impose costs on to workers, drive many women and carers out of the workforce, and end up with a degraded public service. This is quite an achievement for a ‘deal’ that pretends to drive efficiencies.

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This post was originally published Unite the Union’s Croke Park Report blog today.

It is difficult at times to understand what the Government is at. The weekend papers were full of analysis showing why growth was essential, if only to avoid another banking crisis (the IMF has warned of a €16 billion black hole if growth does not return to the economy). And yet Minister Brendan Howlin is threatening a 7 percent across the board-cuts in public sector wages if workers don’t vote for the current pay-cut proposals. There is nothing more certain to ensure we don’t return to growth than to cut wages.

We’re back in recession, according to the CSO (though you wouldn’t know this from reading media commentary which claims growth is on target). This occurred in the latter half of last year – the latest period we have data for. So what’s been happening so far this year? Are there signs of recovery on the horizon?

Retail Sales Index has fallen in the first two months of this year.

Industrial production is down (though there was a marginal increase in February).

Property prices are back in decline – having fallen in each of the last three months.

Manufacturing exports (which makes up most of our exports) fell in January by an annual 17 percent in value.

New vehicles licensed are down in the first two months by 14 percent over the first two months last year.

The Monthly Services Index fell in both January and February of this year.

The Live Register has fallen by 3,000 in the first three months of this year but how much of this is due to people moving into labour activation schemes, returning to education or just emigrating we don’t know.

‘Which will also of course inevitably provide a rationale for reducing weekly SW (social welfare) payments.’

This is a crucial point. Cutting wages hits social protection recipients – unemployed, old age, single parents, the invalid and sick – in two ways.

First, there is a reduction in tax revenue. In the private sector when pay is cut by €100, the state loses nearly €42 ((nearly €63 if the employee is in top tax rate). In the public sector the loss to the state is even higher given the pension levy and pension contributions. This leaves the Government with less revenue and, so, puts pressure on spending.

Second, wage cuts can drive down workers income towards social protection levels. Using the ‘incentive-to-work‘ argument, some will argue that social protection must be cut so that work ‘pays’.

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Originally posted on Unite the Union’s Croke Park Report blog on the 2nd of April.

It is now clear that a systematic attack on wages is currently underway. This attack stretches across the private and public sectors, aimed at both low and higher income groups. It is nothing less than an attempt to re-order the economy into a low-wage, high profit economy – with the Government playing a leading role.

Croke Park 2 is a crucial part of this wage-cutting strategy. With the economy having returned to recession – and with key indicators (retail sales, industrial production, merchandise trade surplus) indicating that the decline has continued into the early part of this year – cutting wages makes no sense except as part of a long-term strategy to depress wages.

But it is not just the public sector. The Minister for Finance recently called for wages in the covered banking sector (AIB, Permanent TSB, Bank of Ireland) to be cut despite the fact that 40 percent of employees earn an average of €30,000 per year or less.

Private sector employers are getting in on the act. In the low-paid sectors, workers’ wages have been falling back to the national minimum wage level since the Joint Labour Committees (JLCs) were, first, struck down by the High Court and, then, reconstituted in a much weaker form by the current Government.

It is interesting that the big news of yesterday made so little news. The CSO revealed that the economy fell back into recession in the latter half of 2012 but you will have to look hard to find much reporting on that. Maybe it’s because this inconvenient fact cuts across the official narrative. And while there was growth in three out of four quarters in 2010 and 2011, there was only one quarter of growth in 2012. That, too, didn’t get much coverage. That, too, may be inconvenient.

So what does this tell us about Croke Park 2? It tells us that it is irrational to cut wages and, so, spending power with an economy falling back into recession. Consumer spending and domestic demand has been stagnating for the last three years.

The domestic economy has flat-lined, suffering under a weight of austerity measures. This year alone there is the impact of the PRSI cuts, the property tax along with cuts in Child Benefit, investment and public sector employment – which will reduce disposable incomes further. Now the Government is proposing to cut the incomes of nearly 300,000 workers. Would anyone be surprised to see this stagnation continuing?

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Let’s take a step back from the details in order to see what is happening in the wider economy – which has now fallen back into a double-dip recession according to the CSO report today. The real game plan is to suppress wages in order to boost profits.

This strategy was first announced Budget 2009 under the Fianna Fail-led government which claimed there was no alternative to wage reduction. The current Government has maintained that strategy. We have seen a restructuring of Joint Labour Committees which has removed much of the protection accorded to low-paid workers in sectors such as retail, restaurants and hotels. And we know what the Government wants in the current Croke Park 2 proposals.

Further, the Minister for Finance has called for cuts of 6 to 10 percent in the banking sector, even though the Mercer Report showed that over 40 percent of all staff in the three covered banks (Bank of Ireland, AIB and PTSB) has an average wage of €30,000.

Profits, meanwhile, have been on the increase. In 2010 and 2011 combined profits rose by 11 percent. If we take a longer view – and compare wage and profit growth projections with the Eurozone average – this is what we find, courtesy of the EU Commission’s AMECO database.

There are two things of note in this:

First, Irish profit growth greatly exceeds that of average Irish wage growth. Irish wages per employee in 2014 is projected to be below what they were in 2008; Irish profits on the other hand will have grown by 30 percent. In the Eurozone wages and profits is projected to grow in tandem.

Second, Irish profits are growing at a faster rate than the Eurozone average while Irish wages are lagging far behind.

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This post is written by Michael Burke, former senior international economist with Citibank and currently an economic consultant. It was originally posted on UNITE's Croke Park Report blog today.

The implementation of Croke Park 2 will have a very damaging impact on the economy and jobs, and as a result will struggle to have any beneficial impact on government finances at all.

That is the verdict based on the experience of austerity measures since 2008. Over that time and until the end of 2011 there were €14.6 billion in spending cuts and tax increases. On the same cash basis GDP fell by €23.6 billion.

This means that for every €1 in austerity measures the economy contracted by €1.6 as workers and businesses, pensioners and others responded to government cuts by making cuts in their own spending and investment. If the response to Croke Park 2 follows that pattern, the economy will contract by about €1.6 billion.

This will lower living standards and hurt jobs way beyond the public sector. Every public sector worker is a consumer of private sector goods and services. Private sector businesses will cut back on investment even further if demand for their products is declining.

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The Government claims their proposed pay-cut deal is ‘fair and equitable’. They must have a strange idea of fairness and equity because when you drill down into the Euros and cents you find that the lower paid will be hit harder.

Let’s take the example of single person who works 10 Sundays a year. Currently they receive double-time. The proposed pay cut would reduce this to 1.75. The impact on gross incomes is the same across the income categories.

However, once you factor in the impact on disposable income (that is, after tax) the situation changes dramatically.

Those on lower pay will find they suffer a much higher impact on their take-home pay – a hit that many lower paid cannot afford or absorb. The reason for this is the interaction between the standard rate of tax and the top rate of tax. The Government, of course, is aware of this impact.

This trend will persist with couples – whether it is one or both spouses working. Those on the standard rate of tax will suffer a higher impact on their net income than those on the higher tax rate.

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I start teaching a level one (introduction level) module in UCD Monday Week on the Financial Crisis. As always, I’ll post what I can here to share it with activists and progressives. This is a short audio I’m putting up for the students to give them a sense of where the module is coming from. […]